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post #1 of 27 Old 04-11-2006, 7:16 PM Thread Starter
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Home Equity Loans

Does anyone have experience with Home Equity Loans?

We've got a decent amount of equity built up in our home and I'm considering pulling about 1/3 out to pay off the last of the credit cards, some misc other debt, and get some work done on the house and yard.

Unless I'm missing the catch we can take out a 15yr loan, pay everything off, get the work done, have cash left over, and have a much lower monthly expenditure than we do now. In fact, even if we pay extra every month and finish it off years early we'll still be spending less per month than we are now.

USAA offers a loan with a $299 "fee" and no penalties for early pay-off.

I'm not interested in a line of credit. I'd consider refinancing, but I'd rather have a loan and be done with it in 6 or 7 yrs instead of a higher mortgage for 15 or 20.

Opinions?



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post #2 of 27 Old 04-11-2006, 8:24 PM
 
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Re: Home Equity Loans

Sounds like you've already done most of the math. Now look at what interest rate the loans you want to consolidate are at compared to what your equity loan will be.
You'll most likely be saving thousands of dollars by consolidating into one low interest payment rather than multiple high interest payments.
It is a very good idea, particularly if you are leaving a good chunk of equity in the house.
Now the downsides: You can NOT miss payments on the equity loan. It is just like your mortgage, so if you see any rough patches in your future make sure you're prepared. If you default on the equity loan, you forfeit the house.
Also, don't go running up the other accounts again, otherwise you'll be putting yourself in worse shape.
Aside from that, go for it.
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post #3 of 27 Old 04-11-2006, 9:03 PM
 
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Re: Home Equity Loans

Just be real careful:

Remember you are taking a loan against the very roof that is over your head. You default for some reason, you lose your home. At least with regular loans you pay your mortgage and keep the home.... you may lose your cars and etc... but at least you have a place to live.

What, if you do not mind me asking, are you paying off?

Car Loans, if so..... 15 year loan on a car? Do you keep a vehicle that long and in the long term you do pay more due to interest and etc...

Credit Card Debt, if so...... matters how deep you are in, your credit score, and etc... right now credit cards are doing crazy things to keep customers, like offering no interest on their cards, especially when you tell them I moving over to a home equity loan, because your rates are out of control.

Home remodeling? Is the value of your home going to increase more then the amount that you invested? Are you going to stay in the home at length to make it worth your while? Remember the housing boom will bust and probably soon, which means the crazy prices that homes have been selling for will go down.

The above is food for thought, and the decision rests on you. If it works out to your advantage and there are no "Catches" go for it.

Lover of all small woodland creatures.
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post #4 of 27 Old 04-11-2006, 9:17 PM
 
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Re: Home Equity Loans

Depo hit the nail on the head. If your going to add value to the house, etc go for it. If your paying off credit cards that are not crazy rates (and they should not be now days with so many good offers floating around), buying toys, going on vacation, etc it probaly is not a good choice. Remember, your paying intrest on that money for 15 years, not the 2 or 3 or 5 or whatever it will take to pay off your credit cards. You just got to remember your are borrowing money, and paying interest on it, for a long time (15 years in this case.) Its not "free" money. Sometimes having one monthly payment and no other debt "looks" clean and tidy...but in the long run it may not help you. If you already have gotten yourself in a bad situation where you cant afford your monthly bills right now, it can be a solution in the short term. But your not fixing whats broken...your just spreading payments out longer...and paying interest on them. You need to do the math, crunch the hard numbers, and see what benifits you the best. You seem to be focused on monthly payments, thats a factor of how much you spend (or already have), and how long you take to pay it off, juggling the numbers doesnt matter. What matters when your dealing with interest is the longer you pay on it, typicaly the more you spend.
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post #5 of 27 Old 04-11-2006, 9:17 PM
 
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Re: Home Equity Loans

My wife and I put our credit card debt onto a single card with zero percent interest so we could pay it off faster. We made a promise to leave the equity in our house untouched in case something really bad happened or in case we could pay it off early. Just measure the plus against the minus.

Nerve rackin' sons a.......
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post #6 of 27 Old 04-11-2006, 9:18 PM
 
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Re: Home Equity Loans

Usually a good idea, as others have said. Also, you can claim the interest on your taxes.
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post #7 of 27 Old 04-11-2006, 9:32 PM
 
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Re: Home Equity Loans

Quote:
Originally Posted by HondaGalToo
Usually a good idea, as others have said. Also, you can claim the interest on your taxes.
Yes for some reasons, but not always.

They try to sell the Home Equity Loan by saying you can write it off, but that is not always the case.... So when you apply for the loan, make sure they, and also a tax attorney states that "yes" you can write it off.

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post #8 of 27 Old 04-11-2006, 10:14 PM Thread Starter
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Re: Home Equity Loans

Thanks for the input. I'm not ready to jump, but I'm glad the research is moving along.

We're only talking a monthly payment on the H.E. loan of around $250.00/month. Even adding that to our current mortgage payment leaves us with a total monthly payment that is much less than 90% of most people's mortgages and well within our "comfort zone." There's still a lot of equity left in the house and we'd plan to pay extra in order to take care of the loan early.

Right now, the total for the bills we have and would like to pay off is around $600-650/month. The majority of it isn't credit card, but there are some special circumstances that need to be kept personal.

The things we'd like to do to the house are basics that should increase the value substantially, like get rid of the original 12yr old carpets, replace the rotting wood-ish garage door, paint, tile, simple landscaping, etc. We're not talking about a hot-tub or game room with a wet-bar!



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post #9 of 27 Old 04-11-2006, 10:15 PM Thread Starter
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Re: Home Equity Loans

We're meeting with our tax accountant this week. I'll check on the interest savings.



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post #10 of 27 Old 04-11-2006, 10:28 PM
 
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Re: Home Equity Loans

You definately fall into the parameters of doing it. If you're accustomed to paying $600/mo for what the equity loan would cover, pay $500 when you can and you'll be set.
Call a couple tax perparers or tax accountants, but basically the amount of interest you can write off on an equity loan has to do with the home's market value minus the total amount of debt owed on home (essentially your equity amount). Say your home is worth $180,000 and your mortgage balance is at $100,000. You can write off the interest on up to $80,000 on an equity loan. If you get an equity loan for $90,000 you will not be able to write off the interest on $10,000 of that loan.
You stated you're planning on only taking about 1/3 the equity value of the home, so that's not a concern. The other requirement is that the debt is not used to substantially improve the home - I don't recall the exact wording. That's where what you're planning on doing may need to be looked at. I'm pretty sure the legal term refers to adding on to the house or other large projects that could more or less make the equity loan more valuable than the mortgage loan (if that makes sense), but double check.

EDIT: I see you are meeting with your tax guy this week. Ask him the legal terminology.
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post #11 of 27 Old 04-11-2006, 10:38 PM
 
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Re: Home Equity Loans

Quote:
Originally Posted by DUX
Right now, the total for the bills we have and would like to pay off is around $600-650/month. The majority of it isn't credit card, but there are some special circumstances that need to be kept personal.
Yeah, even with the 2 for 1 discount tigerblade and I got, our penis enlargements were still pretty expensive. I've been thinking of rolling that 'debt' into my house too but I don't want to tell anyone about it.

VEE DUBB in da house... representin deutchland!
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post #12 of 27 Old 04-11-2006, 10:39 PM
 
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Re: Home Equity Loans

The laws are different from State to State. My wife is a Mortgage Broker. If you need info shoot me a PM and I'll see if I can get you the answers you need.
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post #13 of 27 Old 04-11-2006, 11:01 PM
 
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Re: Home Equity Loans

Quote:
Originally Posted by DEPO
Just be real careful:

Remember you are taking a loan against the very roof that is over your head. You default for some reason, you lose your home. At least with regular loans you pay your mortgage and keep the home.... you may lose your cars and etc... but at least you have a place to live.

What, if you do not mind me asking, are you paying off?

Car Loans, if so..... 15 year loan on a car? Do you keep a vehicle that long and in the long term you do pay more due to interest and etc...

Credit Card Debt, if so...... matters how deep you are in, your credit score, and etc... right now credit cards are doing crazy things to keep customers, like offering no interest on their cards, especially when you tell them I moving over to a home equity loan, because your rates are out of control.

Home remodeling? Is the value of your home going to increase more then the amount that you invested? Are you going to stay in the home at length to make it worth your while? Remember the housing boom will bust and probably soon, which means the crazy prices that homes have been selling for will go down.

The above is food for thought, and the decision rests on you. If it works out to your advantage and there are no "Catches" go for it.

Must obey the sheep dog
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post #14 of 27 Old 04-11-2006, 11:05 PM Thread Starter
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Re: Home Equity Loans

Quote:
Originally Posted by ccwilli3
Yeah, even with the 2 for 1 discount tigerblade and I got, our penis enlargements were still pretty expensive. I've been thinking of rolling that 'debt' into my house too but I don't want to tell anyone about it.
I didn't have to pay extra for mine. It came that way from the factory.



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post #15 of 27 Old 04-11-2006, 11:06 PM Thread Starter
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Re: Home Equity Loans

Thanks everyone!



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